As the American Auto Industry Continues To Grow, the U.S. Infrastructure Package Unlocks $550 Billion in Government Spending

One of the biggest vertical industry winners to benefit from the passage earlier this year of the U.S. Infrastructure Bill is the automotive industry, which is already the second-largest in the world. According to government statistics, in 2018, U.S. light-vehicle sales reached 17.2 million units, the fourth straight year in which sales reached or surpassed 17 million units.

According to the same source:

  • Since Honda opened its first U.S. plant in 1982, almost every major European, Japanese, and Korean automaker has produced vehicles and invested more than $75 billion in the United States.
  • The U.S. affiliates of majority foreign-owned automotive companies directly support more than 400,000 U.S. jobs. Additionally, many automakers have U.S.-based engine and transmission plants and conduct R&D, design, and testing in the United States. Total foreign direct investment in the U.S. automotive industry reached $114.6 billion in 2018.
  • The automotive industry is also at the forefront of innovation. New R&D initiatives are transforming the industry to better respond to the opportunities of the 21st century. According to Auto Alliance, of the $105 billion spent on R&D globally, almost a fifth ($18 billion) is spent in the United States.

The $550 billion investment by U.S. taxpayers dwarfs all other investments at a time when automotive industry workers are finally coming out of the COVID-19 period, which impacted every industry, especially those where workers must be in factories to be productive.

Here are a few highlights:

The bill sets aside $7.5 billion to help build a national network of electric vehicle charging stations. The goal is to create a nationwide network of 500,000 EV chargers, which also supports climate change initiatives.

The legislation comes with funding to assist manufacturers in safety improvements, including compliance with new rules on automatic shut-off for keyless ignition systems, updated headlamp standards, and a requirement for new vehicles to be equipped with drunken driving and impaired-driving prevention technology.

Also in the mix:

  • Government studies about battery recycling and second-life battery applications
  • Funding that may help expand the relatively small market of hydrogen fuel cell electric vehicles (FCEV), a multi-year project that requires a lot of investment in equipment to build a fueling station. Forty-seven of those stations currently operate in California and, according to the California Fuel Cell Partnership, can cost up to $2 million to build from the ground up or to convert an existing traditional gas station.
  • Development of a report due out in 2022 on emerging alternative fuel vehicles (hydrogen, natural gas, and propane) and infrastructure that includes an evaluation of emerging alternative fuel vehicles and projections for potential locations of emerging alternative fuel vehicle owners during the 5-year period beginning on the date of submission of the report.
  • Development of a report describing the results of a four-month study on the cradle-to-grave environmental impact of EVs. (A 2019 report by the Massachusetts Institute of Technology Energy Initiative found that building batteries and fuel sources for EVs produce higher emissions than traditional car production).
  • Updates to automotive safety standards, including a study of commercial motor vehicle crash causation.
  • Crash avoidance technology legislation that will establish minimum performance standards with respect to crash avoidance technology and require that “all passenger motor vehicles manufactured in the United States on or after the compliance date…shall be equipped with…a forward collision warning and automatic emergency braking system…”
  • Research regarding the installation and use on motor vehicles of driver monitoring systems to “minimize or eliminate (1) driver distraction; (2) driver disengagement; (3) automation complacency by drivers; and (4) foreseeable misuse of advanced driver-assist systems…”
  • Research on connected vehicle technology, giving the Administrator of the NHTSA a mandate to “expand vehicle-to-pedestrian research efforts focused on incorporating bicyclists and other vulnerable road users into the safe deployment of connected vehicle systems…”
  • Advanced impaired driving technology research to be presented “…not later than 3 years after the date of enactment…the Secretary shall issue a final rule prescribing a Federal motor vehicle safety standard…that requires passenger motor vehicles manufactured after the effective date of that standard to be equipped with advanced drunk and impaired driving prevention technology.”

The most profound investment may be collectively around the advancement of Electric Vehicles (EVs) especially given the Biden Administration’s policy that only EVs will be the only new vehicles by 2030.

“Not later than 1 year after the date of enactment…the Secretaries (Transportation and Energy) shall jointly establish an electric vehicle working group to make recommendations regarding the development, adoption, and integration of light-, medium-, and heavy-duty electric vehicles into the transportation and energy systems of the United States,” the Infrastructure Bill reads.

The “second life of batteries” is another major aspect: “The Secretary shall carry out a program of research, development, and demonstration of (A) second-life applications for electric drive vehicle batteries that have been used to power electric drive vehicles; and (B) technologies and processes for final recycling and disposal of the devices described…(i) To improve the recycling rates and second-use adoption rates of electric drive vehicle batteries. (ii) To optimize the design and adaptability of electric drive vehicle batteries to make (them) more easily recyclable.”

Today, there is little being done on the infrastructure required to recycle electric vehicle batteries.

For example, in its 2020 Impact Report, Tesla said that it has the capacity to recycle 92 percent of its battery cell components. Automakers like Volkswagen and Toyota are working on battery end life technology, and VW has opened a battery recycling facility in Germany and the progress being made here is sure to accelerate with the funding boost.

The impact of the Infrastructure Bill on the automotive industry goes well beyond the primary design and manufacturing arenas.

The U.S. has an extensive network of automotive parts suppliers serving the industry, which directly supported almost 600,000 U.S. jobs in 2018. According to a study conducted by IHS Markit, U.S. Automotive Parts Manufacturing jobs were up nearly 19% since 2012. At that time, more than 871,000 Americans were directly employed by the automotive parts manufacturing industry, up from 734,000 in 2012.

Together with indirect and employment-induced jobs, the total employment impact of the motor vehicle parts manufacturing industry is 4.26 million jobs, an increase of nearly 18 percent from 3.26 million in 2012, which represents 2.9 percent of the jobs in the total U.S. employment market and 2.4 percent of the U.S. gross domestic product (GDP). These numbers continue to grow as American auto manufacturers continue to produce high-quality vehicles and consumer and commercial demand continues to rise.

With the addition of funding as part of the Infrastructure Bill, further innovation is poised to flourish over the next decade, keeping the U.S. in the lead for what could be decades to come.

Matt Vulpis

Matt Vulpis is a fresh out of college writer/journalist, already with a myriad of published articles across a variety of topics and industries. He is very passionate about writing, as well as sports, and television/film. While he enjoys writing articles pertaining to business tech, he wants to one day write a TV show as a head screenwriter. He has a bachelors in journalism with a minor in sports studies from Quinnipiac University.

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